Assignment task: Back in the old days when I was an undergrad, I hung around with a bunch of guys over beer and pizza and each month we would participate in what we called the "Ghoul Pool". The rules of the pool were simple:
1. It costs you $5 to join for that month, and
2. Select a well-known person who is under age 50 and believed to be in good health.
At the end of the month, if your celebrity passed away, you get the pot. If no one wins the pot, it is held intact, we all go out for beer and pizza and make a new investment into the pool. Each new month you could choose a new celebrity or keep your old celebrity.
Eventually, as the pot grew to over $100, a bank account was set up to hold the pool assets. I can't tell you how much money I lost selecting Keith Richards.
Is this similar to how life insurance works? Why or why not? If it does feel like insurance, what type of life insurance is this?